BP have announced that their profits have dropped by an incredible 22% after a difficult year in 2007, but they have pledged to close the "performance gap" on their rivals.

Last year was a testing time for the oil giant, in May, former chief executive Lord Browne resigned after he lied to a court to prevent newspaper reports of his relationship with Canadian Jeff Chevalier - ending a 12-year reign for the so-called “Sun King”.

The firm’s safety culture was then put under the spotlight in two high-profile reports into the 2005 explosion at its Texas City refinery, which killed 15 people.

Tony Hayward - Lord Browne’s potential successor found himself in the hot-seat far sooner than expected . He launched a root and branch review of BP on taking over the firm, which has been plagued by operational problems and stoppages at its US refineries, such as Texas City, Carson City, Toledo and Whiting.

His plans to cut overheads and slash 5,000 jobs - as well as higher dividends - will be welcomed by investors, who have seen the value of their shares come under pressure since the beginning of 2007.

The company’s competitive shortfall has been put down to a combination of lower US refining capacity and production delays in the Gulf of Mexico, as well as BP’s higher cost base compared to rivals.

Royal Dutch Shell rubbed it in last week by posting profits of £13.9 billion - a UK record prompting calls for a fresh windfall tax on “obscene” oil company profits.

Seymour Pierce analyst Peter Hitchens said: “BP has been in no end of trouble particularly in its US operations and that has hurt the performance of the company relatively to Shell.”

While Mr Hitchens believes that BP is “over the worst”, he said the company should be looking to raise its capital expenditure as oil firms face higher tax demands, as well as competition from state-owned companies.

He added: “BP has got to bring on the next wave of fields. It has got to start growing the business again.”

Mr Hayward is increasing capital expenditure to as much as 22 billion US dollars (£11.2bn) this year, although this still leaves the group some way behind Shell, which will spend around 25 billion US dollars (£12.7bn) during 2008.

Mr Hayward’s mantra for BP is now “safety, people and performance” after the two critical reports which tarnished the closing months of Lord Browne’s leadership.